When a Tennessee homeowner is hit with a financial crisis, it can be a stressful and worrisome experience. While most financial problems are temporary, even minor trouble can have adverse implications. In many cases, filing for bankruptcy is a viable option. However, the average person might not clearly understand various terminology used when discussing this form of debt relief, which intensifies stress and causes confusion as to which program best fits a particular person’s needs.
What is a means test?
One of the most common phrases associated with bankruptcy is the “means test.” Taking a means test is part of the process to determine eligibility for Chapter 7 or Chapter 13 bankruptcy. It is a test that compares a prospective filer’s income to the median income in his or her state. If it is at or below a certain level, the person may qualify for Chapter 7 bankruptcy. If it is at or above that level, the person is likely disqualified from Chapter 7 but may qualify for Chapter 13 bankruptcy.
Liquidation of assets might occur
Those qualifying for Chapter 7 bankruptcy are likely to hear the term “liquidation of assets.” This means that nonexempt assets will be subject to liquidation, meaning they may be sold with the proceeds used to pay back creditors. It is important to seek clarification ahead of time regarding what types of assets are exempt from liquidation.
It may be possible to reaffirm an account
“Reaffirming an account” means that a person can choose to continue to make payments toward a debt after a bankruptcy case is closed. This option is typically exercised in order to retain possession of collateral, such as a car. When an account is reaffirmed, the filer will remain responsible for the underlying debt after the bankruptcy case is closed. A Tennessee bankruptcy can explain additional terms and clarify regulations, including what must be done to determine eligibility for a specific bankruptcy program.